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Having Control Over Your Time Is the Only Sensible Financial Goal

I'm 30 years old. Most people I know my age work like a dog in a job they hate, stumbling through a sleep-deprived hysteria of a life, hoping it'll all pay off someday. Some of them truly love what they do, but it's rare. Of the busiest people I know, those systematically driving themselves insane outnumber those who like what they do 10 to 1, at least.

One of the top things elderly Americans regret in life is being too busy to have had the time to do the things they actually enjoyed. Older Americans overwhelmingly wish they had worked and less and spent more time with family, going for a walk, sleeping in, and just enjoying life. Few people my age will take this advice seriously.

The field of positive psychology teaches us that having control over your time is one of the biggest keys to being happy. People adjust to material stuff quickly. But losing control of your time makes almost everyone miserable. No matter how much you love work, everyone should do everything they can to gain control over their time.

And here's what's crazy: Most of us could if we wanted to.

Take a look at this chart. It shows how many hours an average American needs to work today to produce as much as stuff as he did in 1950:

Sources: Federal Reserve, MIT.

We are insanely more productive today than we were half a century ago. If every American worked just 11 hours a week, we could effectively be as rich per person as we were in 1950 -- a time most of us look back on as a nostalgic era of prosperity.

But who does this? You probably know more people who work 11 hours per day than 11 hours per week.

In 1930, John Maynard Keynes wrote an essay called "Economic Possibilities for our Grandchildren." The economy was a wreck in 1930, but Keynes had a radical idea: By 2030, we would all be so rich and productive that the average American would basically become Homer Simpson, working as little as possible and drowning in leisure. Keynes wrote:

For the first time since his creation man will be faced with his real, his permanent problem -- how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.

Keynes thought we'd all be productive enough to get by on 15 hours of work per week -- nine to noon, five days a week. "For three hours a day is quite enough to satisfy ... most of us!"

This sounds like a joke today. But Keynes was pretty much spot-on projecting how rich and productive Americans would become.

"I would predict that the standard of life in progressive countries one hundred years hence will be between four and eight times as high as it is today," Keynes wrote.

Real (inflation-adjusted) GDP per person in 1930 was $7,200. Today it's close to $50,000, or seven times higher. And it's not just the rich who have done well. The median American family in 1930 had an income of $1,200, or about $16,000 adjusted for inflation. In 2011, the median American household earned $51,134 -- three times higher than in 1930. Adjusted for inflation, today's minimum wage is 78% higher than the first minimum wage put in place in 1938.

The typical American works works slightly fewer hours today than they did in the past, but not many. The average worker clocked 40.6 hours per week when Keynes wrote his paper in 1930. Today, they work about 34 hours per week.

There are holes in Keynes' prediction that we'd all be working 15 hours a week. "Except for the financially independent, people aren't really free to choose their hours of work," economist Nicole Fortin wrote last year. And the reason we're richer is because people have worked as hard as they can, creating new technology that makes us better and smarter year after year.

But I think the biggest reason we keep working full steam ahead despite growing wealth is because most people's idea of a good life is measured relative to their peers, rather than absolute terms. You don't want a Rolex because it does something that makes your life better. You want it because your neighbor has one. So even though almost everyone is better off than they would have been 100 years ago, we don't feel better off because everyoneelse is better off, too. And since we don't feel better off, we keep working like slaves, hoping we'll someday get to a magical financial happy place. It's so depressing.

Keynes realized that people's desires would keep growing no matter how rich they became. He wrote about needs "which are relative in the sense that we feel them only if their satisfaction lifts us above, makes us feel superior to, our fellows."

But that's just a personality issue. If you can get over it, Keynes wrote, "a point may soon be reached, much sooner perhaps than we are all of us aware of, when these needs are satisfied in the sense that we prefer to devote our further energies to non-economic purposes."

Here's what it comes down to: Most of us would be happier if we had more control over our time. And we can gain more control over our time by realizing that what used to be considered middle class -- even wealthy -- is now viewed by some as abject poverty, only because our expectations have surged. By keeping your expectations in check and not trying to keep up with your neighbor, most of us can probably retire -- or gain enough financial independence to work in a job we love -- far sooner than you realize.

Check back every Tuesday and Friday for Morgan Housel's columns on finance and economics.

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This article is so true yet, for some reason, it is so hard to embrace as part of one's lifestyle. It's unfortunate but I'm willing to bet there are severeal of us out there that realized the vision of this article AFTER we fell into the loan/debt trap that society pushes us towards. It's common practice to take a loan out for school, then a loan for a car, then a loan for a house, etc. It's terrible for the individual but it's almost expected and people march on like ants thinking they are 'supposed' to be tens to hundreds of thousand dollars in debt.

Articles like this are great as they help spread the word that you don't have to buy the same thing other people have in order to be happy. As this article points out, doing so tends to lead you in the opposite direction. Hopefully those folks that find themselves in deep debt b/c of these they were told were wise (massive student loans for example) can find a second chance at some point.

I love your naïve series. You should tell this story to the native americans, or the tribes that are losing their lands as we speak. If they only enjoyed life more before the Europeans arrived to "civilize" their paradise...

one thing I got from the chart in this article, is that based on the slope it looks like the low hanging fruits of productivity have already been picked decades ago. I wish arm chair economists and science fiction writers would pay attention to that fact before writing all these "robots are destroying jobs" articles that have become so popular since the recession hit.

I'm 32 and my wife and I just spent the last 4 years killing off all of our debt. Before my first son was born my wife wanted to be a full-time mom. We sat down for the first time to really go over our finances only to realize we where $150K in the hole with cars, student loans, and a small business loan.

We eventually knocked off enough debt for her to stay at home to raise our 2 boys. Last year we finally paid off the last of our debt. With the new financial freedom my wife started her own business which is booming right now. My regular job is much less stressful because if I miss my quarterly commission we are not on the street. I spend less time in the office, 40 hours max no matter what my boss would like, so I can be with my family. Life is good and getting better. My cars are used, we still shop at Ross, and still use coupons to stock our pantry. I feel we escaped most of the money chasing only to find that we are much better off being perceived as poor then actually being poor.

^ Yeah. That's the biggest flaw in Keynes' forecast. (Although his prediction wasn't entirely serious, either). There are a lot of things individuals can do -- work less, save half your income -- that would be terrible for the economy if everyone did, but that you shouldn't feel guilty about doing as an individual because you know with certainty that very few others will follow you.

Morgan--Bertrand Russell covers some of this ground in his book "In Praise of Idleness". A good read if you haven't read it already. I'd bet you might gather some good quotes for one of your compilations of things that you've been reading.

Sorry, I think I need to clarify. I do think this is generally a good and healthy advice. Especially if one's type of work is not getting him very far, and if one tends to spend his income on useless things.

Unfortunately, if history is any guide, this is not a good long-term strategy. It's not just a "personality issue". There are certain reasons behind each human behavior. Over and over again, people who can invest more time and energy in organization, research, military, manipulation, influence, will come to dominate away people who don't.

This is unfortunate, because it does not prove talent or quality or even competence. It's also unfortunate, because it can result in non-optimal expenditure of resources, overall.

I totally recommend Matt Ridley's book. While it may appear unrelated, I think it is very much related to this article and the previous ones you wrote.

I think that if you really, really, can accept a lower standard of living & have more time & control over you life then GO For It.

The trouble is that a lot of people equate not working so hard as living in the moment. They think of all the time & things they like to do in their 20's & 30's & skimp on the long term planning & saving that they need to have to keep on having a good life when they are in their 50's, 60's & 70's. There is a reason why people work hard in the prime of their life & that is because it is when they are most capable of dealing with the hardships needed to build up the savings & the job skills which gives them a better income.

In the end, while you would probably prefer to go on adventure when you 25 vs 65, most definitely would prefer to work a McDonald's job when they are 25 vs. 65.

What wonderful nonsense! Perhaps what should have been said but wasn't is that inflation effects everything so while we on average earn $50,000 a year, our bills add up to 48,000 a year as well! So we are oh so productive, but we have to spend 40 hours a week at a job that dictates that our time spent at the job is determined by the Boss, not us! We work those hours to break even, and if we want to get ahead, we have to a) work more hours, b) ask for more money, c) work smarter d) work for ourselves e) blah, blah, blah! Nice try, though.

Technology is the answer to give humans more time to do other things or to be better able to multitask. Driverless cars and iPhone/iPad factories run by robots are perfect examples of what can increase productivity even further in the future. Just think while your car drives you to run an errand or to a sales appointment you can use a iPad or some newly created voice-to-Internet system to write an email or place an order for 10,000 widgets for your business. This will free up some time to be spent at home or at the local coffee shop. Companies like Google and Apple are bound to profit.

Why do people's bills add up to $48,000 a year as you seem to state? How much of it is credit card debt that they acquired buying stuff they don't need or buying stuff for other people that they don't need because they are told they are supposed to?

How much of that is spent on rent or a mortgage to live in a place that is probably far bigger than they need and is probably far bigger than they grew up in, or their parents or grandparents did?

I wonder how much of that $48,000 is spent on going out to eat and the movies and other sorts of entertainment?

I wonder the kind of car driven by those that spend $48,000 a year on debt?

I wonder what the cable situation is for those people as well. Netflix runs less than $10 a month and combined with HULU people should be able to watch most things for under $25 a month considering local channels are free with an antenna?

Not saying you fit the situation that you described, but so many others do and their situation is a product of their own doing and if they were to change some of their habits they could rectify the situation that they currently in. Instead some wont change and then complain that they don't make enough when that is not the problem.

That's why I think a lot of people don't realize that Obamacare will probably reduce unemployment. Employers that don't want to provide insurance that once used three 40 hour a week employees will now they have to hire four 30 hour a week employees to get the same amount of work done.

Morgan, in an otherwise good article, you are missing the point. The reason we are working more than ever is as clear as day - income inequality. For most of the 20th century, up until around 1970, for every dollar increase in labor productivity, roughly 50 cents went to the owners (shareholders), and roughly 50 percent went to the workers (increased wages). But since 1970, the trend has been that more and more of the increase in labor productivity has been captured by the owners of companies rather than the workers. Labor productivity increased sharply during the recent recession, but while stockprices soared, wages did not. If the ongoing increase in labor productivity were still being split roughly 50-50 with workers as it was for most of the 20th century, we actually WOULD be working less and less, just as Keynes predicted.

The problem with looking at individual prosperity this way is you are not considering the cost of things. Yes, you have considered inflation, but inflation and consumer price inflation are not actually the same concept - in the early Industrial Revolution, consumer prices dropped but inflation was rampant, because the cost of machinery, raw materials and capital costs skyrocketed with the increase in investment spending and industrial purchasing. Inflation is entirely the product of the supply of money (which increases whenever loans are made and decreases only when loans go bankrupt) whereas CPI is driven by the physical supply side. You could not support a family in most areas on $16000 a year anymore because the cost of houses, food et cetera has so far increased, well beyond the rate of inflation. Meanwhile, luxuries that people used to associate with middle class or upper middle class, such as microwaves, radios and televisions, can be purchased at thrift stores for $7 a piece. One of the big problems in popular economics today is the tendency to try to make things that are fundamentally vector quantities single numbers - if unemployment could actually be expressed adequately by a single number, everyone would be paid the same hourly wage (supply and demand).

When Roosevelt introduced Social Security, people retired at 65, and were lucky if they reached that age. Today, within that same number of working years, people have to finance an additional 15 - 20 years of retirement. And far more of those years are in costly stages of dementia.

On the other hand, young educated people were less allergic to having babies, and liked children more than their canine "companions".

This article is simplistic and seems to ignore many reasons for this increase in hours and why we can't just sashay out of the office at the bell of 5pm (or if we do, we are carrying work for home later or started the day at 5am). I have no doubt that folks in the 1950s worked hard, however there are differences.

This article omits the aspect that employers don't necessarily hire enough staff to cover the work load in fear that should the work load lessen, they have too many staff. The result, especially since 2008, is that many people get to do the work of 1.5 or 2 (or more) people. I certainly don't pull the 70-80 hour work week due to my need for luxuries or lack of other interests. I haven't had a raise in a few years, yet I am working more hours (office states they didn't meet their targets - no one got a raise). I am given the projects as my responsibility, and simply put, the work needs to get done regardless of whether or not I want to do it. Yes, I could say no, but really is that realistic? Employees are hired as a production resource to meet project goals not long-term and valued employees. One learns quite quickly that one is replaceable. Yes, my job is interesting, but I have the project load of 2 people. I can't wait for the time when I can simply have control on my time - but your article seems to have an unstated idea that all employees are high enough in the office hierarchy to just say no.

Other key 21st century issues: Productivity is undoubtedly less due to the remarkable amount of busy work, false deadlines, inundation of email, stacks and stacks of project admin accompanying this busy work (many folk do not have support staff for this aspect), the adoration for the open office with its attached noise level, the hand-holding need for group work or touch-down meetings, etc. etc.

As other readers have noted, debt load, how far one's money really extends in relation to cost…

In the meantime, I have 2 reports to write today and prep for tomorrow's meeting in order just to tread water.

" In 2011, the median American household earned $51,134 -- three times higher than in 1930. Adjusted for inflation, today's minimum wage is 78% higher than the first minimum wage put in place in 1938."

^

Maybe this is part of the problem as well. Median income tripled while minimum wage is only up 78%.

I believe that some of the urge to have bigger dwellings is people need more "space" and may be necessary since family members have hobbies that need seclusion. Savannah roots?.....Problem working only half days everyone else works full days and create more inflation so you would be impoverished.

Any article that tries to compare hours worked and income associated with those hours from the 1950's to today and does not also address the 'silent creep' impacts of ever-increasing FICA tax percentages and progressive income tax brackets is missing key drivers behind today's manic workers. People are working more hours to earn dollars with diminished purchasing power but increased withholding. So the final income is less for same hours expended.

this observation holds regardless of the size of the house or the age of the car. A person cannot spend what they never get to take home.